According to a report by the Economic Observer on the 18th, Chen Jinshi, the chairman and actual controller of Jiangsu Zhongnan Construction Group Co., Ltd., is facing a real-name report from a natural person, Chen Lin.

On the morning of November 16, 2018, a police officer from the Economic Case Investigation Brigade of the Nantong Public Security Bureau confirmed to a reporter from the Economic Observer that the Nantong Public Security Bureau had accepted Chen Lin’s real-name report on Chen Jinshi’s suspected false bankruptcy and concealed accounting documents and accounting books..At present, the case has been accepted and is in the initial stage of investigation.said the police officer.

If the investigation does not open the case, then we will take the form of criminal private prosecution to report again.Chen Lin's attorney, Xu Zidong, told the Economic Observer.

Origin

The dispute originated from a holding subsidiary of Zhongnan Construction that has gone bankrupt and liquidated—Haimen Zhongnan International Real Estate Consulting Co., Ltd. (hereinafter referred to as Zhongnan Real Estate).

Zhongnan Real Estate has two shareholders in total, one is Chen Lin, the real-name whistleblower who holds 49% of the shares; the other is Haimen Zhongnan Century City Development Co., Ltd.Century City), holds 51% of the equity, so Zhongnan Construction is the actual controller of Zhongnan Real Estate, and Chen Jinshi is the legal representative and actual controller of Zhongnan Real Estate.

Due to poor management, Zhongnan Real Estate went bankrupt and liquidated in 2015.

In August 2018, Chen Lin, as a shareholder, reported to the Nantong Public Security Bureau: Chen Jinshi, as the actual controller of Zhongnan Real Estate, embezzled 86.07 million profits of the company by concealing property and other methods during the company's bankruptcy liquidation, thus harming natural personsShareholder Chen Lin's shareholders' equity of 41.6952 million yuan, while Chen Jinshi is suspected of instigating, authorizing, and forcing accounting institutions and personnel to conceal accounting vouchers and accounting books that should be preserved according to law.

A reporter from the Economic Observer noticed that on page 74 of Zhongnan Construction’s 2014 semi-annual report, Zhongnan Real Estate was listed as a subsidiary of Zhongnan Construction’s wholly-owned subsidiary, and the equity of other shareholders (that is, Chen Lin) was 41.6952 million yuan.The company's business is real estate sales agency, marketing planning and other real estate information consulting.

In June 2007, Zhongnan Real Estate was established with a registered capital of 500,000 yuan. Zhongnan Century City contributed 255,000 yuan, accounting for 51% of the shares; Chen Lin contributed 245,000 yuan, accounting for 49% of the shares.

On December 3, 2012, Zhongnan Real Estate was revoked its business license by Nantong Haimen Industrial and Commercial Bureau.Two years later, Zhongnan Real Estate went bankrupt and liquidated.

Audit: Unable to determine the authenticity of the accounts, due to the revocation of the business license, the company cannot operate normally.

On June 9, 2014, the Haimen City People's Court of Jiangsu Province appointed Beijing Weiheng (Nantong) Law Firm to set up a liquidation team to carry out bankruptcy liquidation of Zhongnan Real Estate.The People's Court of Haimen City, Jiangsu Province entrusted Nantong Jinlixin Accounting Firm to audit Zhongnan Real Estate, and the People's Court of Haimen City issued an appraisal report (Jinlixin Shen [2014] Jianzi No. 002).

The appraisal report shows that in the financial report issued by Zhongnan Construction as of December 31, 2013, the minority shareholders' equity of Zhongnan Real Estate is 4169.52 yuan, which is consistent with the total owner's equity reflected in the book of Zhongnan Real Estate, which is 85,092,182.61 yuan.

That is to say, although the business license of Zhongnan Real Estate has been revoked, the owner's equity of Zhongnan Real Estate as of December 31, 2013 was about 85.092 million yuan, and Chen Lin owned 49% of its equity.

The sudden turning point occurred in January 2014. Zhongnan Real Estate adjusted related matters.There is a huge difference in the total amount of equity - the difference is 86.07 million yuan.

There are four main items to be adjusted. The first category (2014-1-1# voucher) is listed in the profit and loss adjustment of previous years. From June 2007 to September 2009, the rent of CBD office space was 2.7 million yuan; the second category (2014-1-2# certificate) in the profit and loss adjustment of the previous year was listed as an advance salary, bonus, and recruitment fee of 4.438 million yuan;

The third type (2014-1-3# certificate) writes off commission income of 32.78 million yuan in the previous year's profit and loss adjustment account; the fourth type (2014-1-4# certificate) lists CBD marketing expenses in the previous year's profit and loss adjustment account of 48 million yuanYuan.

In the appraisal report issued by the Haimen City Court, the responsible auditing unit, Jin Lixin Accounting Firm, stated in writing: According to the existing appraisal data, we cannot confirm the authenticity of these four expenditures, because we have not seen the salary payment schedule, and have not checked.See salary payment records, but no housing lease contract, no basis for writing off commission income, no basis for listing 48 million yuan in marketing expenses.

The key to Chen Lin's real-name report is this - she believes that the accounting firm has not seen the relevant certificates, and the owner's rights and interests of Zhongnan Real Estate's 86.07 million yuan have disappeared.

In the end, in the appraisal report issued by the People's Court of Haimen City for the bankruptcy liquidation of Zhongnan Real Estate, Nantong Jinlixin Accounting Firm could not make a determination on the owner's equity of Zhongnan Real Estate as of June 30, 2014 because it could not confirm the authenticity of the accounts..

Regulations have been required to be rectified

The strange thing happened in the annual report of Zhongnan Construction from 2014 to 2016.Although Zhongnan Real Estate has gone bankrupt and liquidated, Zhongnan Real Estate is still included in the financial statements of Zhongnan Construction as a holding subsidiary of Zhongnan Construction.

For this reason, the Jiangsu Securities Regulatory Bureau replied to Chen Lin on March 8, 2018, stating that Zhongnan Construction still included the bankrupt liquidated Zhongnan Real Estate in its financial consolidated statements from 2014 to 2016, which violated the Accounting Standards for Business Enterprises No. 33 - Consolidated FinanceStatement (Cai Kuai [2014] No. 10) Article 7.

On the other hand, the Jiangsu Securities Regulatory Bureau required Zhongnan Construction to rectify.

On March 8, 2018, Zhongnan Construction also issued an announcement, acknowledging that the company had received a letter of regulatory concern from the Jiangsu Securities Regulatory Bureau issued by the Jiangsu Securities Regulatory Bureau of the China Securities Regulatory Commission on March 7, 2018 (Su Securities Regulatory CommissionLetter (2018) No. 151), the company attached great importance to this, sorted out, analyzed and summarized the problems raised in a timely manner, and formed a rectification report.

In the rectification report of Zhongnan Construction, the above facts were admitted: Zhongnan Real Estate’s daily account handling is not standardized.On January 31, 2014, Zhongnan Real Estate adjusted its profit by RMB 86,068,100 in the name of profit and loss adjustment in the previous year. This accounting treatment was unfounded, and it was an improper accounting treatment, which violated the applicable corporate accounting standards of Zhongnan Real Estate at that time-dash;Article 12 of Basic Guidelines (2006) (Decree No. 33 of the Ministry of Finance).

Questions followed, where did the huge difference of 86.0681 million yuan before and after Zhongnan Real Estate's owner's equity go?Since the appraisal report of the People's Court of Haimen City has been unable to confirm the authenticity of the previous year's profit and loss adjustment——the accounting account, who should be responsible for the authenticity of Zhongnan Real Estate's accounting account?As a partner of Zhongnan Real Estate, Chen Lin's shareholder rights of 41.6952 million yuan were really violated?

The reporter interviewed the listed company on the above-mentioned reported matters, and Zhongnan Construction responded that: through internal verification and inquiry of the company's controlling shareholder and actual controller, as of now, the company and the actual controller have not receivedThe security agency's notice on the reported matter, the content of the report is a fabricated fact.The company currently does not have any undisclosed matters that should be disclosed as required by the stock listing rules.

Since the case has been accepted by the Nantong Public Security Bureau and is in the preliminary stage of investigation, the truth about the relevant matters in the bankruptcy and liquidation process of Zhongnan Real Estate and whether it will affect the chairman of Zhongnan Construction, Chen Jinshi, still needs to be issued by the public security authority.

Economic Observer reporter Zhang Xiaohui